Dollar hits 2023 high on US interest rate forecasts

Dollar rose in European trade on Tuesday against a basket of major rivals, extending gains for the third straight session, and scaling 2023 highs amid expectations of another US interest rate hike this year.

Analysts also expect the Federal Reserve to maintain high interest rates throughout 2024. 

The Index

The dollar index rose 0.25% to 106.20, the highest since November 2022, after rising 0.35% on Monday, the second profit in a row as US treasury yields spiked. 

US Yields 

US 10-year treasury yields rose 0.6% on Tuesday, extending gains for the second straight session and scaling a 16-year high at 4.564%.

Such gains came after the Federal Reserve issues official expectations that clearly pave the way for another interest rate hike this year.

The Fed also expects two interest rate cuts in 2024, much lower than previously expected.

Fed Remarks

Several Fed officials hinted last Friday at several more interest rate hikes, and said the battle with inflation isn't over yet.

US Rates

Current pricing for a 0.25% interest rate hike in November stands at 20%, which is still rather low.

However, pricing for a 0.25% Fed interest rate hike stands at a higher 40%.

Now investors await important US personal spending data to measure inflation and judge the likely path ahead for US policies.